TY - JOUR
AU - Borenstein,Severin
TI - On the Persistent Financial Losses of U.S. Airlines: A Preliminary Exploration
JF - National Bureau of Economic Research Working Paper Series
VL - No. 16744
PY - 2011
Y2 - January 2011
DO - 10.3386/w16744
UR - http://www.nber.org/papers/w16744
L1 - http://www.nber.org/papers/w16744.pdf
N1 - Author contact info:
Severin Borenstein
Haas School of Business
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-3689
E-Mail: severinborenstein@berkeley.edu
M2 - featured in NBER digest on 2011-07-01
AB - U.S. airlines have lost nearly $60 billion (2009 dollars) in domestic markets since deregulation, most of it in the last decade. More than 30 years after domestic airline markets were deregulated, the dismal financial record is a puzzle that challenges the economics of deregulation. I examine some of the most common explanations among industry participants, analysts, and researchers -- including high taxes and fuel costs, weak demand, and competition from lower-cost airlines. Descriptive statistics suggest that high taxes have been at most a minor factor and fuel costs shocks played a role only in the last few years. Major drivers seem to be the severe demand downturn after 9/11 -- demand remained much weaker in 2009 than it was in 2000 -- and the large cost differential between legacy airlines and the low-cost carriers, which has persisted even as their price differentials have greatly declined.
ER -